Manila new tax law confuses consumers

Manila new tax law confuses consumers

MANILA (UPI): Confusion swept across the Philippines yesterday
as the government implemented an expanded value added tax law
that hikes to 10 percent levy on a wide range of service
industries.

Consumers coming off the holiday hiatus were surprised to find
that shops and markets have jacked up prices of basic commodities
such as meat, rice and sugar as the law took effect Monday.

"Why did the prices go up suddenly?" a lady consumer asked.
"If the government wants to raise taxes does it mean we should
pay more too?"

Bureau of Internal Revenue director Liwayway Vinzons-Chato
said prices of commodities and services covered under the E-Vat
should not rise more than 10 percent.

Chato urged consumers to be vigilant and report establishments
taking advantage of the law, saying the bureau has the power to
close businesses not following the E-Vat.

She said the bureau has set up hotlines to help consumers and
even business establishment understand the new law.

The E-Vat law was signed in 1994, but its implementation was
delayed when the Supreme Court issued a restraining order after
several members of the Congress questioned its constitutionality.

In November 1995, the high court lifted the order, paving the
way for the law's implementation which was expected to generate
some 7.9 billion pesos (US$301.52 million) in revenues this year.

The E-Vat covers most service sectors such as
telecommunications, restaurants, transportation, publications and
real estate. Exempted from the law are agricultural products,
fertilizers and basic consumer commodities such as meat and
vegetables.

Rep. Wigberto Tanada said he felt "saddened" that the
government implemented the law despite opposition from several
sectors, saying "it will bring more difficulties to the poor."
"This is anti-poor," he said. "We do not need this law."

Tanada warned it would be difficult for the government to
monitor businesses that would unreasonably raise prices, adding
it could even fuel inflation this year.

But economic analysts played down the possible negative
effects of the new tax law, saying the Philippines would benefit
from a "standardized taxation."

Yuri Alliado, an investment analyst at Philippine Asia
Equities Securities, said a "widening of the tax base" would
prove beneficial to the country in the near future as more and
more firms set up shops.

"Objectively this is not really inflationary," Alliado said.
"What is wrong with expanding (taxation) to certain industries?
Tax is only 10 percent and not in any way going to affect
operations."

But he said the government needs to launch more information
campaigns, as negative sentiments over three successive months of
double-digit inflation beginning in September has left sour
marks.

"There is apprehension at the moment," he said. "People just
do not realize the good certain government moves bring as the
whole market is made up of expectations."